May Market Commentary

It looked for a long time that the main headline for this commentary would be the opening salvos in a trade war between China and the USA. The International Monetary Fund published a bullish report on world trade, saying that global growth will hit a 7 year high of 3.9% this year – giving a stark warning at the same time that trade risked being ‘torn apart’ by a protracted trade war.

But then came the news of North Korean leader Kim Jong-un’s, historic visit to South Korea and his meeting with President Moon Jae-in. There followed a bromance which would have been impossible just a few months ago, and a commitment to rid the Korean peninsula of nuclear weapons. The meeting would have been unthinkable at the beginning of the year when North Korea was boasting of being able to reach the US mainland with its rockets: now Pyongyang says it will invite US observers to witness the shutdown of its nuclear site in May.

By the end of the month even the China/US threats and counter-threats seemed to have receded a little and most of the major stock markets which we cover made up losses suffered early in the month on fears of a trade war. There was, however, one significant fly in the ointment as the price of oil continued to climb: Brent crude went past $72 a barrel in light of the continuing troubles in Syria and the instability in the region.

Let’s start the UK section with some really good news: 2017 was a record year for the UK wine industry, as figures showed 64% more bottles of UK-made wine reached the market than in 2016. The Wine and Spirit Association said the industry was reaping the benefits of ‘huge’ investment over the last decade.

…But if April brought good news for wine, it brought yet more bad news for retail as the wet Easter proved a washout for the UK high street, following the bad weather which kept shoppers at home in March. Carpetright announced the closure of 92 stores – and you have to think that the merger of Asda and Sainsbury’s, announced at the end of the month, will ultimately lead to store closures and job losses. There have been plenty of warm words from both sides but it is hard to see that the merger can be good for jobs or, in the long term, for consumers as the number of big supermarket groups in the UK reduces from four to three.

We have commented above on the IMF forecast for world trade: that same forecast included a prediction that UK growth this year would be 0.1% higher than originally thought at 1.6%. HSBC also predicted that UK exports would rise this year by their fastest rate since 2011.

Other numbers for the UK made mixed reading: a slowdown in construction and the effects of the ‘Beast from the East’ meant that UK growth in the first quarter of the year was just 0.1% – the lowest figure since 2012. Mortgage lending was also down, as figures for March showed it falling 2.3% to £20.5bn.

There were some positive figures: wages finally climbed above inflation as the year long squeeze on pay showed signs of ending earlier than expected, and unemployment fell to 4.2% – its lowest level since 1975. And London was voted the world’s top financial centre, finally climbing above New York for the first time in five years.

The vote was presumably taken without reference to TSB: April ended with TSB taking the phrase ‘banking chaos’ to a whole new level. The bank upgraded its systems – inevitably in order ‘to improve customer service’ – and ended up seemingly giving customers access to anyone’s account except their own.

Fortunately, there was no such chaos for the FT-SE 100 index of leading shares. After some lacklustre months, it rose 6% in April to end the month at 7,509. As so often happens, the pound went in the opposite direction, falling 2% to end the month trading at $1.3754.

Throughout April, the debate raged about whether the UK should stay in some sort of customs union with the EU after March next year. Doing so would avoid a ‘hard border’ between Northern Ireland and Eire – but would severely limit the UK’s ability to do trade deals with countries outside the EU.

It would, sadly, be possible to write an entire 2,500-word commentary on the various models of customs union – or partnerships – that are currently being discussed: we will attempt to do it in less than 200.

The first option – favoured by the Brexit supporters and known in Whitehall as ‘Max Fac’ (short for Maximum Facilitation) would see the UK and EU agree to minimise all checks, using smart technology and building on best practice from around the world (for example, the USA and Canada do not have a customs union). This means that there would be a border between the UK and the EU, but it would be as light touch as possible.

The second option is a hybrid model – the Customs Partnership – which rests on the EU recognising UK customs checks as equivalent to their own, so that goods entering the EU at say, Rotterdam, could in theory travel on to the EU without further checks.

This appears to be Theresa May’s favoured option, but has been described by hard right Tory Jacob Rees-Mogg, as ‘cretinous’ while the International Trade Secretary Liam Fox, has come out firmly against any form of customs union. With eleven months to go until March 2019, the debate will undoubtedly rumble on: but we have reached the 200 word limit, we promised. Don’t worry, the politicians will undoubtedly still be discussing it next month…

April was a busy month for French President Emmanuel Macron, who made a high-profile visit to Washington and, earlier in the month, made a speech in Strasbourg calling for ever-closer union between the EU’s member states and, as the EU faced up to the loss of the UK’s contribution, more tax and revenue raising powers for the EU.

Many commentators perceived this as Macron’s bid for the de facto leadership of the EU, with German Chancellor Angela Merkel widely seen to be in a weaker position following her eventual coalition agreement with the Social Democrats. German dominance no longer a safe bet, ran a headline in City AM.

Away from the corridors of power and in the banking halls, the European Central Bank announced it would leave interest rates unchanged, despite the pace of growth in the Eurozone starting to slow. There was bad news from Deutsche Bank, which announced ‘significant’ job cuts as it scaled back its corporate and investment banking operations. Christian Sewing, the new CEO of Germany’s biggest lender, said that the cuts were ‘painful but unavoidable’ as the bank reported a sharp drop in first quarter corporate and investment banking revenues.

Fortunately, there was no pain on the German stock market, as the DAX climbed 4% in the month to end April at 12,612. The French stock market had an even better month as it rose 7% to 5,520 – and there was even good news from Greece, with the Athens stock market up 10% to 858.

All the attention at the beginning of the month focused on the war of words – and potential trade war – between the US and China. It ended with the historic meeting in Korea and South Korean President Moon Jae-in suggesting that Donald Trump be awarded the Nobel Peace Prize.

Away from that potential plaudit, the US President had some troubling numbers to contend with. The US trade deficit widened in February to $57.6bn (£42bn) and there are suggestions that the US could have a trade deficit of a trillion dollars a year by 2020.

Jobs growth slowed in March, with just 103,000 jobs created in the month, and there were disappointing figures for the first quarter, as annualised growth slowed to 2.3%. Those figures are unlikely to be helped by suggestions that the US could get as many as four interest rate rises this year, as the Federal Reserve pursues a more aggressive line in a bid to keep inflation under control.

April was, however, a good month for both Alphabet (the parent company of Google) and Amazon as their sales and profits surged ahead. But it was a lot less fun for Facebook’s Mark Zuckerberg: he endured an uncomfortable month as he apologised for his company’s massive data breach at a Congressional hearing. Not a good month for Wells Fargo either, as the bank was fined a record $1bn (£730m) for failing to resolve investigations into car insurance and mortgage lending breaches.

What did the Dow Jones index make of it all? Virtually nothing. Having opened the month at 24,103, the Dow closed April up just 60 points at 24,163.

Far East
The news from the Korean border rather overshadowed China’s news in the month – specifically that the country had seen its economy grow at 6.8% in the first quarter, ahead of the government’s growth target for the year of ‘around 6.5%’ – although obviously, this figure would be under pressure from a prolonged trade war with the US.

In Chinese company news, Didi Chuxing, China’s equivalent of Uber, the world’s largest ride-hailing app and currently reckoned to be worth nearly £40bn, announced modest plans for world-wide expansion.

The Economist Intelligence Unit published an interesting article, listing the countries which were most ready for the robotics revolution: South Korea headed the list, with Japan and Singapore joining it in the top four. (The UK was in 8th place, just ahead of the USA.)

Obviously, the news of the détente between North and South Korea had a positive influence on the region’s stock markets. Only China – perhaps still worrying about a possible trade war – saw its stock market fall during the month, with the Shanghai Composite down 3% at 3,082. Hong Kong went in the opposite direction, up 2% to 30,808 and the South Korean market rose 3% to 2,515. Japan, free of the worry of North Korean missiles flying over its islands, saw the Nikkei Dow rise 5% to close April at 22,468.

Emerging Markets
US sanctions hit Russian shares said a BBC headline in the middle of the month, reporting that sanctions imposed by the US had hit the shares of companies controlled by Russian oligarchs, ‘as the Russian stock market tumbled in the wake of the sanctions.’ This followed the diplomatic crisis sparked by the poisoning of former spy Sergei Skripal and his daughter, and President Trump’s threats of tariffs on aluminium and steel.

Well, sanctions or no sanctions the Russian stock market had recovered by the end of month, closing April up 2% at 2,307. There was an even better performance from the Indian stock market, up 7% in April to end the month at 35,160 – and Brazil completed our Emerging Markets hat-trick as the market there rose 1% to close at 86,115.

And finally…
April was a good month for the ‘And finally’ section of the commentary – but we start with something that is probably best not read while you are eating breakfast.

NASA, America’s space agency has been looking for a material that can be transported into space and used for the spare parts that are inevitably needed on a long space mission. The idea is that the parts would be made using a 3D printer: but what material to use? The rocket scientists at NASA have decided that, well… human waste would be ideal. Transported into space and put to use: that’s an idea that Major Tom never discussed with ground control…

There had been widespread rumours of an exodus of London’s leading bankers after Brexit. Apparently, that is not now going to happen. A report in Politico said that the bankers’ wives – and one husband – had been to inspect Frankfurt, the rumoured new banking capital of Europe, and found it to be ‘dark, grey and dull’. So there you are: David Davis and Michel Barnier can huff and puff all they like – in the end it looks like bankers’ wives will decide the shape of Brexit.

Sadly, one wife who had rather less influence was the wife of Tanzanian gambler, Amani Stanley. So sure was Amani that his beloved Manchester City would clinch the Premier League title by beating Manchester United at home that he bet his wife on the result. All was looking good when City were leading 2-0 at half-time. Unfortunately, United stormed back in the second half to win 3-2 and Amani lost his wife for a week to his United supporting friend Shilla Tony. As yet there is no news on her husband’s gambling from Mrs Stanley…

5 pitfalls that put your retirement plans at risk

Imagine the scene; you’ve spent your life living frugally, saving efficiently and investing wisely. You enter your well-earned retirement financially secure and excited for the years ahead. The future could pan out in one of two ways; the first could lead to continued security and the financial freedom to enjoy your retirement as planned; the second might lead to the unfortunate disappearance of that security and the resulting stress that would involve.

The sad truth is that the things that lead people down the second path are usually easily avoidable; it’s rarely investment market declines which are the cause of a failed retirement strategy. Here are the five most common pitfalls that you can avoid through careful planning.

1. Helping too much

We all have a natural desire to help our loved ones, but helping too much can lead to harming our own plans. It’s all too common for people to dip into their retirement funds to give money to their children, grandchildren and other relatives. There’s nothing wrong with lending a hand or giving gifts, but you have to know what you can afford and stick to your limits. Don’t be afraid to admit you can’t help.

2. Buying a second home

Having your own little getaway or spending your winters in the sun may seem like a fantastic prospect, but it’s important to be realistic. A huge portion of your retirement capital can be tied up in owning a second home, and there are often unexpected costs involved. In the past you could count on property values to appreciate, but that isn’t true of many areas now. If you want a second home in retirement, make sure you have a substantial financial cushion.

3. Unmanageable debt

Debt can sometimes be considered a financial management strategy rather than something to steer clear of in retirement. Some financial advisers may recommend investing cash to earn a higher return than the interest rate of the debt, instead of paying off the debt altogether. It does, however, come with fixed expenses and if those expenses combine with unexpected expenditures and begin to exceed your fixed income, problems can arise. Avoiding debt during retirement where possible will help avoid financial uncertainty.

4. New business ventures

A lot of retirees choose to continue working and producing income in some way. Many may decide to start new businesses. If this is something you’re considering, be careful and separate most of your retirement assets from the business. Only risk capital that you don’t need to sustain your standard of living as a failing business can erode your nest egg quickly.

5. Absence of a spending plan

One of the easiest mistakes to make is not planning your spending. A lot of retirees don’t know how much money is safe for them to spend in the early years and still ensure they have enough capital to last into their later years. Surveys suggest that people believe they can spend 7% or more of their savings each year safely, however, financial planners and economists say the spending limit is closer to 4%.

Everyone’s optimal spending plan will vary and, ideally, you should revisit your estimates each year to make adjustments. If you have any questions around this topic, please feel free to get in touch with us directly.

The financial advantages of saying ‘I do’

A marriage or civil partnership can be a beautiful union of minds and hearts, but there’s no reason why it should end there. There can also be financial benefits to being with your partner, and one of these is the Marriage Allowance. In the 2018-19 tax year, the Marriage Allowance lets you transfer up to £1,190 of your Personal Allowance to your partner, meaning a tax reduction of up to £238, as long as you meet a few requirements.

For the couple to benefit, they must be married or in a civil partnership. The lower earner must have an income of £11,850 or less, and the higher earner must sit in the basic rate tax bracket of between £11,850 and £46,350. It’s worth noting that in Scotland, the higher earner’s salary must be less than £43,430 as the thresholds for basic rate payers differ.

Lower earners can transfer their unused tax-free allowances to their spouse, with the higher earning partner receiving a tax credit equal to the amount of Personal Allowance that has been transferred. The good news doesn’t end there either as the Marriage Allowance can be backdated as far as 5th April 2015. This means that, if you are eligible, you could claim 2015-16’s £212 allowance and 2016-17’s allowance of £220 in this tax year, leaving you with some free cash for you and your partner to treat yourselves.

If you’re currently receiving a pension or you live abroad, your application for the Marriage Allowance will not be affected, as long as you receive a Personal Allowance. However, if you or your partner were born before 6 April 1935, applying for the Married Couple’s Allowance might be more beneficial to you (you can’t claim both at once!).

What does the TSB experience teach us about online banking?

TSB haven’t had a good time recently, and the same can be said for the nearly 5 and a half million customers who still couldn’t access their accounts after 7 days of technical meltdown. When the bank attempted to migrate some of their services to a new platform, involving the transfer of 1.3billion customer records, those customers were met with an array of problems.

They saw it all, from no access whatsoever, to logging in to their online banking service, to being greeted by accounts which they did not recognise as their own. One customer reported having access to a business account to which they held no affiliation, with a balance of over £2.3m. Despite releasing a since retracted statement, boasting of the ‘capacity of [their] technological management’ of the transfer, Josep Oliu, chairman of TSB owners Banco de Sabadell, was forced to accept the scale and impact of the mishandling.

The real world consequences of such a massive lockout, the size of which we haven’t seen from a British bank since RBS in 2012, are enormous. Although Paul Pester, CEO of TSB, has since taken responsibility of the IT failure and tweeted announcing, “Of course, customers can rest assured that no one will be left out of pocket as a result of these service issues,” it’s too little, too late for some customers. With business accounts being affected, some companies have been unable to pay their staff.

So in a banking climate where over 700 bricks and mortar branches closed last year, and thousands of call centre jobs are being slashed, what are we to do to protect ourselves from the next online blackout? The simple answer might be to not keep all of your money in one place. It’s worth considering opening another account so that if one bank experiences a similar problem, you’re not completely shut out.

If you’ve been affected by the TSB fiasco and want to move to another bank, first make sure you claim any compensation you may be owed by TSB. When claiming compensation, it’s important that you’ve kept a record of each time you were affected, so you’ve got evidence of the full amount you could be due.

April Market Commentary

To say that March was a busy month is an understatement.

Russia went to the polls to elect a new President and, in the least surprising result of the year, Vladimir Putin won another six year term. With the Chinese Communist Party removing the rules limiting Xi Jinping to two terms in office, two of the world’s three superpowers now effectively have presidents for life. North Korean leader, Kim Jong-un, jumped on the train and headed to Beijing for talks, ahead of his meetings with Moon Jae-in, the South Korean leader, and with Donald Trump. Presumably Kim and Xi Jinping did not discuss sanctions: China is supposedly imposing harsh UN sanctions on North Korea – and yet Kim saw his economy grow by more than 3% last year. ‘Curious and curious-er’ as Alice would have said.

Talk of sanctions and trade tariffs brings us to Donald Trump, who kept one of his pre-election pledges as he imposed a 25% import tariff on foreign steel and a 10% tariff on aluminium. The world may be worrying about a trade war between the US and China – and China has recently hit back with tariffs on US imports – but Trump is sticking to his ‘America first’ policy, and figures for February showed that the US added 313,000 jobs in the month.

In the UK, we had Chancellor Philip Hammond’s first Spring Statement, and agreement was finally reached on the transition agreement with the European Union, which will last until New Year’s Eve 2020.

Unsurprisingly, talk of a trade war meant that it was a bad month for world stock markets, with all but two of the major markets we cover in this commentary falling in March.

As mentioned above, March in the UK brought us the first of Philip Hammond’s Spring Statements. There was relatively good news on the UK’s debt and borrowing figures but, as George Osborne frequently reminded us, the UK is always vulnerable to economic activity in the wider world, and any optimistic figures from the Chancellor could swiftly be consigned to the bin if the threatened trade war between China and the US develops.

He did, however, give a pointer to what we might see in the Autumn Budget. The plastic tax had been widely trailed, as had yet more moves to tax multinational companies such as Google and Apple. Interestingly, he made a reference to ‘seeking views’ on encouraging businesses who want to use digital payments. And why wouldn’t he? Digital payments can be tracked and taxed and would represent a way to strike back at the black economy.

Sadly, there are rather a lot of businesses on the UK high street that would like to take any payment, digital or otherwise. Restaurant chain Prezzo announced the close of 94 branches with the loss of 1,000 jobs; Next said it was experiencing ‘the toughest trading for 25 years’ and the Bargain Booze chain admitted it was close to administration.

House price growth was the lowest for five years and the balance of payments deficit in the three months to January widened to £8.7bn as imports of fuel increased.

There was good news on inflation however, which dipped to 2.7% thanks to a fall in petrol prices, which allowed the Chancellor to comment that most people should see a rise in their real wages “by the end of the year.”

Unfortunately, it looks as though the Bank of England will have increased interest rates well before then, with some commentators expecting an increase in base rates as early as next month and the Bank saying that rises might need to be “earlier” and “by a somewhat greater extent” than they had previously thought.

Unsurprisingly, the FTSE 100 index of leading shares didn’t like the sound of this and fell 2% in March to end the month at 7,057. It is now down by 8% for the first three months of the year – its worst opening quarter since 2009, when we were mired in the financial crisis. However, it was a good month for the pound, which will at least give you some comfort if you are planning a holiday abroad. The pound was up by 2% against the dollar in March and is now trading at $1.40.

Well, we have spent a few months in this commentary reporting ‘no real progress’ on the Brexit negotiations. Now, it seems we might finally be getting somewhere, with the UK and EU reaching an agreement over the ‘transition deal’ – the relationship and arrangement we will have with the EU after we leave, which is currently less than a year away on March 29th 2019.

Your view of the transition deal will very much depend on your initial stance of Brexit: but let us try and summarise the main points as impartially as possible:

  • The transition period will end on New Year’s Eve 2020 – three months earlier than had been predicted
  • The UK will be able to negotiate, sign and ratify trade deals – for example, with the USA – during the transition period
  • Existing international agreements and EU trade deals will continue during the transition period
  • The financial settlement we have already agreed is locked in, and both sides are committed to ‘acting in good faith’ during the period
  • It is less good news for the UK’s fishermen: the UK can only ‘consult’ on fishing during the transition period
  • New EU citizens arriving in the UK during the transition period will have the same rights as those EU citizens already here
  • And nothing has so far been agreed regarding the border between Northern Ireland and the Republic of Ireland.

It has been repeatedly said of the EU negotiations that ‘nothing is agreed until everything is agreed’ – but you have to think that the above will be the basis of our relationship with the EU for the 21 months after March next year.

Those in favour of Brexit generally see greater control of trade policy and the agreement to act in good faith as ‘wins’. They are less keen on the extension of free movement and the fisheries policy. Those in favour of staying in the EU see it all as a mistake – but we are moving inexorably towards March 2019 and the UK will be leaving the EU.

The beginning of March brought the Italian election and – to no-one’s surprise – no clear result. The Eurosceptic, populist Five Star Movement was the biggest single party with a third of the vote, but Matteo Salvini, leader of the anti-immigrant League was also claiming the right to run the country as part of a right-wing coalition with former Prime Minister Silvio Berlusconi’s Forza Italia party. Inevitably, forming a coalition could take weeks of negotiation and horse-trading.

Much of the attention elsewhere in Europe focused on the Brexit deal, although French leader Emmanuel Macron will see his resolve tested this week by a series of rail and airline strikes as the transport unions begin a series of planned strikes in protest at his reform agenda.

The two major European stock markets both drifted down by 3% on the worries about a global trade war. The German DAX index was down to 12,097 while the French stock market closed the month at 5,167.

It is a testament to the newsworthiness of its President that we now accumulate as many notes for the US section of this commentary as we do for the UK.

As above, Donald Trump slapped tariffs on imports of steel and aluminium, with China responding over Easter by imposing tariffs on a number of US imports, including wine. There has been much wailing in the California wine regions – but the state is staunchly Democratic and the President is teetotal, so he is unlikely to lose any sleep. With 313,000 new jobs added, there are plenty of Americans who approve of what the President is doing.

Trump’s ‘America First’ policy and concerns for national security were further evidenced as he blocked the takeover of chipmaker Qualcomm by Singapore-based rival Broadcom.

At $140bn (£100bn) the deal would have been the biggest technology sector takeover on record, but there was “credible evidence” that it threatened US security, with fears that it could have put China ahead – or further ahead – in the development of 5G wireless technology.

If March was a good month for jobs and for national security, it was a dreadful month for Facebook. The company had $58bn (£41bn) wiped off its value after the Cambridge Analytica data breach scandal, leaving CEO and founder Mark Zuckerberg with a lot of apologising and explaining to do.

Nor was it a good month for Wall Street with the Dow Jones index inevitably falling amid worries about a trade war. It closed March down 4% at 24,103.

Far East
After the death of Mao Zedong in 1976 the Chinese Communist Party introduced a ‘two term limit,’ intended to ensure that a cult of personality could not re-emerge and that no-one could ‘rule for life’. But in March the ‘two sessions’ – the annual meetings of the national legislature and the top political advisory body – did what had widely been expected and scrapped the rule, effectively opening the way for Xi Jinping to rule indefinitely.

One of the first appointments the new ruler-for-life would have rubber-stamped was that of US-educated economist, Yi Gang, as the next governor of China’s central bank. It is an appointment seen as an attempt to ensure continuity, as China continues to try and rein in growing debt and risky financial practices.

No doubt, the cautious new central banker would have approved of China’s growth target for 2018, now confirmed as 6.5%. This is below the growth of 6.9% reported for 2017 (the first time in seven years that the pace of growth had picked up) and unquestionably reflects the country’s commitment to less risky economic policies and lending.

As mentioned above, the month ended with Kim Jong-un visiting China – seen as a necessary prequel to his meetings with Moon Jae-in and Donald Trump. The visit received a cautious welcome in South Korea, which wants to see the end of nuclear weapons in the Korean peninsula.

There was good news for Samsung in South Korea as the company launched its new S9 and S9+ phones at the World Mobile Congress: the company seems to have regained much of the ground lost when its phones recently took to rather inconveniently exploding…

Unsurprisingly, three of the four major Far Eastern markets were down in March, reflecting concerns over a possible trade war between China and the USA (with China responding by imposing tariffs on US imports over the Easter weekend). China’s Shanghai Composite index fell back 3% to 3,169. The Japanese market was down by a similar amount to close the month at 21,454 while the Hong Kong index was down just 2% to 30,093. The one market to buck the trend and manage a gain during the month – albeit only by 1% – was South Korea. Buoyed by hopes of positive talks with the North the market rose 1% to end the month at 2,446.

Emerging Markets
As we mentioned in the introduction, Vladimir Putin secured another six year term as Russian President, winning 76% of the vote, with his main rival, Alexei Navalny, barred from contesting the election. This came hot on the heels of the tit-for-tat expulsions of ‘diplomats’ after the alleged poisoning of former spy, Sergei Skripal in Salisbury, but that was never going to affect the result of the election. Putin’s share of the vote was up from the 64% he won in 2012. Asked if he would run again in 2024 (by which time he will be 72), Putin replied, “What you are saying is a bit funny. Do you think I will stay here until I am 100 years old? No!” So that confirms it then…

With the West supposedly imposing sanctions, the Russian stock market is more immune than some to threats of a global trade war, and the stock market was down just 1% in March to 2,271. The Indian stock market was hit much harder and fell 4% to end the month at 32,969. The Brazilian market was the only other market of those we cover not to fall in the month, closing up just 12 points at 85,366.

And finally…
There is news that the Church of England will now accept contactless transactions through Apple and Google Pay, albeit only for weddings, christenings and church fetes. Donations via contactless to the collection plate are still being trialled. “It may take too long,” said a Church spokesman. “The old ways could still be the best.”

…A sentiment that was probably echoed by Kentucky Fried Chicken. We wrote about the problems of KFC last month: how the bargain bucket became the empty bucket after they jilted long time food delivery partner Bidvest for the sultry charms of DHL.

Like a middle-aged man admitting the truth after a mid-life crisis, KFC have now repented their error and begged Bidvest for forgiveness. A new agreement has been reached and at least 350 of KFC’s 900 restaurants can look forward to what Bidvest promise will be a “seamless return.”

Rather less seamless may be the foreheads of Apple engineers at their new $5bn (£3.6bn) headquarters in Cupertino. Apple had a problem: according to Reuters, “if engineers had to adjust their gait when entering the new building they risked distraction from their work.”

The solution at the 175,000 acre campus, which is home to 13,000 employees, was doors with completely flat thresholds and massive glass windows with extra transparency and whiteness. So transparent and white that “when the walls have been cleaned you can’t even tell they are there.”

Which was bad news for Apple’s super-intelligent engineers as they walked along lost in thought. Several Apple employees have been left bloody and concussed after walking into the transparent doors and windows. The San Francisco Chronicle has published transcripts of three 911 calls made after Apple employees injured themselves in this way. “We did recognise that this could be a problem, especially after the doors and windows had been cleaned,” said an Apple spokesman.

If only Apple had shown the insight of the Church of England…

How to approach student loans with your kids

University is always going to be at least partially a financial decision both for prospective students and their parents, or whoever they rely on financially. Calculating the rising total bill for tuition fees and cost of living for a degree course can make university seem like an impossibility for some. But it’s essential that all involved carry out proper research into the cost of higher education before making a decision about the future, rather than letting sensationalist reporting in the media surrounding student debt scare them away.

Firstly, it’s crucial to remember that the cost of higher education never needs to be paid all in one go. Once a university place has been secured, tuition fees are paid automatically by the Student Loans Company for those who have taken out a student loan, and loans are also available for living costs.

Importantly, no student will need to start repaying their loan until the April after they graduate at the very earliest. Even then, only those students earning above £25,000 per year will be required to start making payments (the threshold has been increased from £21,000 to £25,000 in April 2018). Under the system, a graduate pays 9% of everything they earn annually over the £25,000 threshold. Someone earning £26,000 would therefore pay 9% of £1,000, or £90 over a whole year.

If a graduate’s earnings drop below the threshold or they find themselves out of work, the payments stop automatically. As student loan repayments are collected through your salary, you don’t have to worry about making them on time or debt collectors chasing you.

It’s important to remember that this isn’t something to feel ashamed or worried about: the system has been designed to ensure only those who can afford to pay back their student debt after graduating will be required to do so. If you still have outstanding student debt thirty years after graduating, this will be cleared no matter how much you still owe. As such, it’s expected that most graduates won’t repay their entire loan plus interest within thirty years.

A student loan is not the same as a bank loan, and as such doesn’t appear on your credit file. The amount you owe in student loan repayments will therefore not impact upon your ability to apply for other types of loans or credit cards when you graduate. The only time it may potentially come into play is in mortgage applications, where your take-home income is considered in assessing whether you can afford repayments on your home.

These are just some of the points which warrant consideration before making a decision about going to university. Each prospective student and the people they rely on financially will have individual circumstances to consider. The most important thing to remember therefore is to do your own research and make an informed decision about the financial facts and myths surrounding higher education.

Warren Buffett runs a website… for your kids!

As one of the most successful investors of all time and currently the third richest person in the world with a net worth of over $88 billion, it’s likely that you’ll know Warren Buffett’s name. You might even have visited his website at, perhaps giving particular attention to the page entitled ‘Warren’s 10 Ways To Get Rich’. What you might not know, however, is that Buffett has another website – one which is aimed not at you, but at your children and grandchildren.

The site, ‘Warren Buffett’s Secret Millionaires Club’, is based around an animated television series of the same name which ran in the US from 2011 to 2014. In the series, Buffett acted as a wise mentor to a group of four children, helping them make positive decisions about earning and investing money. Whilst the series has now finished and has never aired outside America, the site gives you access to twenty-six ‘webisodes’, all no more than five minutes long, giving your youngster the chance to get to know the characters whilst picking up some child-friendly financial advice.

The ‘Games’ section of the site is one your kids are likely to enjoy whilst also helping them hone some valuable numeracy and business skills. ‘Number Blaster’ and ‘Counting Money’ will help your child work on their addition and subtraction, whilst ‘What Do You Know About Business?’ and ‘Business-Building Brainstorm’ aim to give a basic grounding in what a business is and how someone might go about successfully setting one up.

Another page you might want to look at with your youngster is ‘Ask Warren Buffett’s Secret Millionaires Club’, which gives them the opportunity to submit a question to one of the four characters mentored by Buffett in the series in order to get some advice. Even if your child doesn’t have a question they want to ask, the page offers plenty of questions from other kids and the answers provided. Currently there are questions answered about how to start investing in the stock market, how to start up a fashion business, and why it’s a good idea to save money.

Hopefully, you’ll find something on Buffett’s site for your children or grandchildren to explore, on their own or with you. Whilst there’s no guarantee that visiting the site will be the first step to your child becoming a millionaire in the future, starting their financial education early in a way that makes it fun is always a good idea. Warren Buffett’s Secret Millionaires Club can be found at

How the gender gap hits women’s retirement savings as well as pay

A recent study has found women are generally less well prepared for retirement compared to men. The research, carried out by savings company Standard Life, reveals that whilst over half (55%) of men own a pension, this figure falls to just over a third (36%) in women. Even more alarmingly, more than seven in ten (71%) of women stated that they did not know how to start a pension.

The average amount of money saved by women into their pensions each month is around £124, when the recommended amount is at least double that, depending on age and other factors. The average woman in the UK wants approximately £532 per week to live on when she retires, but even factoring in the state pension, women are typically only saving around half of what they should to be able to achieve this.

Almost nine in ten (89%) of the 1,000 women over 18 surveyed said they would like help with planning for their retirement. Over three quarters (76%) of the respondents who don’t currently have a pension admitted to being worried about this.

“Female pension ownership is frighteningly low and for those that do save, the amount saved is nowhere near enough for a comfortable retirement,” said Aileen Power, Standard Life’s women’s pensions spokesperson. She added that many women “want to continue having their sun holidays abroad, city breaks, dinners out and have some fun when they retire” but that “the average woman will be hard pressed to run a car in retirement” based on the average amount currently being saved.

Whilst the focus of the research was on women’s savings and pensions, Power also highlighted the wider issue of people failing to save enough for when they finish working. “While men will be relatively better off in retirement, on average, neither men nor women are saving enough to maintain their current lifestyles in retirement. You don’t want to get to 68 and find you can’t afford to enjoy a glass of wine or a decent night out.”

Power also emphasised that the first thing to do if you haven’t been saving for your retirement is informal research: “Our advice would be to start off by talking about pensions to your friends and family, particularly those friends who are financially savvy. Google pensions, read websites etc. Find out how much your peers are saving and consider getting some financial advice.”

* Research originally conducted in Euros.

March Market Commentary


“The first month of 2018 was a good one for the major stock markets which we cover in this Bulletin. We report on 12 markets and 11 of them made gains in January – in some cases, spectacular gains, which many investors would regard as more than adequate for a full year.”

Sadly, February was the exact opposite: 10 of the 12 markets on which we report were down in the month, following a global sell-off at the start of February. But that is the nature of savings and investment: stock markets rise and fall. Saving and investing is a long term business: a marathon not a sprint.

The markets were ‘spooked’ in the first week of the month by signs of inflationary pressure in the US: the President has drastically cut corporation tax and many firms have passed the savings on to their employees in higher wages. Fears of inflation prompted worries that the Federal Reserve would tighten monetary policy in the US. As the Dow Jones index suffered its biggest one day points fall in history so – as always happens in today’s inter-connected world – the fears and falls travelled around the world. The Japanese stock market, for example, fell by 4.73% in one day – its biggest fall since 1990.

World stock markets recovered some of the ground through the rest of the month, but – as we will see from the figures – not all of it.

What of the crypto (or virtual) currency, Bitcoin? It finished January hovering around the $11,000 mark (£7,780), down from an all-time high of very nearly $20,000 and with plenty of experts predicting that it would ‘slide, crash or implode’ in 2018. At the beginning of the month it looked like the experts would be right, as the crypto-currency fell 30% in one day and went below $6,000.

This, though, was in the same week as the global stock market sell-off, and Bitcoin gradually recovered through the month. As we write, the price is $10,669 (£7,640) – so a roller-coaster month for Bitcoin but, at the end of it, very little change.

In politics, German Chancellor Angela Merkel finally found a way to stay in power for another four years and Donald Trump saw his popularity rating climb past 50% and announced he would be running for President again in 2020. At home, Brexit rumbled on: let’s plunge into the detail…

The month in the UK started and ended with bad news on the jobs front. At the beginning of February, supermarket group Morrisons announced that they would be making 1,500 middle managers redundant, and Sainsbury’s made similar gloomy noises. The month ended with both Toys-R-Us and Maplins as further victims of the move to online shopping: both chains called in the receivers, with around 5,000 job losses expected. In between these two events, British Gas owner, Centrica, announced that it would cut 4,000 jobs after a “weak year” – so a very poor month for jobs.

While our glass is half empty we should report that growth in the UK service sector for January was the slowest since September 2016. The Purchasing Managers’ Index was down to 53, well below the 54.2 recorded in December and also falling short of economists’ expectations.

Figures from the Office for National Statistics also showed the UK’s trade gap – the difference between what we import and export – had widened in the three months to December 2017 as exports to Europe slowed. The deficit for December was recorded at £4.89bn, up from £3.65bn in the previous month.

Perhaps the worst news, though, was reserved for Tesco’s director of human resources. We have written many times in this Bulletin about Tesco’s problems: the supermarket group seemed to be weathering the challenges, but it is now facing the largest ever claim for equal pay in UK employment history.

Claimants are seeking £4bn from the company, arguing that staff in (male-dominated) distribution are paid significantly more than staff in (female-dominated) retail. We are talking about an average wage of £11 per hour versus one of £8 per hour, which could add up to a disparity of around £5,000 per year.

UK unemployment also rose in the three months to December, inching up to 4.4%. But hand in hand with the rise in unemployment went a rise in wage growth, and there was certainly also plenty of good news for the UK economy in February. UK productivity growth was the strongest since the financial crisis of 2008; manufacturing grew by 0.3% in December and, again, is doing better than at any time since 2008. First time buyers were at their highest level for 11 years and ten years after being bailed out by the taxpayer, Royal Bank of Scotland finally recorded a profit, albeit what its boss called a “symbolic” one of £752m.

So what did the FTSE-100 index of leading shares make of it all? Like all the world’s leading stock markets, it was down in February. Having started the month at 7,534, it closed down 4%, at 7,232. The pound was also down against the dollar in February, falling by 3% to $1.3768.

The Brexit notes available for this month may not ultimately amount to much. Boris Johnson made a speech: Jeremy Corbyn made a speech: Theresa May is due to make a speech at the end of this week. Meanwhile, whatever the British politicians said, the European politicians said it wasn’t possible, while the pundits turned to semantics, arguing over whether we might leave ‘the’ customs union or ‘a’ customs union.

By the end of March, we will be a year away from leaving the EU: it is easy to believe that everything ‘agreed’ so far will be up for re-negotiation before then.

Perhaps the best clue as to what might happen came – ominously – from the Netherlands. The government there has triggered plans for a ‘hard Brexit,’ recruiting 1,000 extra customs officials in the event that no deal is reached and they need extra people power to administer trade barriers.

My apologies: I forgot. Brexit Secretary David Davis also made a speech, saying no one should fear a “Mad Max style dystopia” after Brexit. Well, that’s cleared everything up…

As we mentioned above, Angela Merkel finally stitched-up a coalition with Germany’s Social Democrats, allowing her to remain as Chancellor for another four years. This does, though, mean that the anti-immigration party, Alternative fur Deutschland, becomes the official opposition to the coalition. With anti-immigration sentiment already strong in EU member states like Poland, Slovakia, Hungary and the Czech Republic, there may well be increased tensions in the EU in the months ahead.

In Germany, the month started with thousands of metal and engineering workers in the south-west going on strike, essentially over their ‘work/life balance.’ The strikers wanted the right to reduce their working week from 35 to 28 hours (on full pay) to allow them to care for children or elderly relatives, before returning to full-time work after two years. The concession was duly agreed by the employers, and obviously could have implications for the whole of the German industrial sector. For now though, enough German workers remained on duty to see the country produce its customary trade surplus – €18.2bn in December.

Italy will have gone to the polls by the time you read this commentary, in an election which, at time of writing, is almost certain to produce no clear result. European Commission President Jean-Claude Juncker has already said that the EU is bracing itself for the ‘worst possible result’ – although whether that means months of trying to form a viable government or success for the far-right Northern League or the populist Five Star Movement, no one is quite sure. Some analysts believe that if either the Northern League or the Five Star movement come to power it will affect confidence in the Euro, but with a few days to go until polling, an unclear result and months of indecision looks the most likely outcome. We’ll update you on the outcome (if indeed there is one) in next month’s commentary.

At least Jean-Claude could console himself with the news that the European Union economy grew at its fastest pace for ten years in 2017, with figures from the EU statistics office Eurostat confirming that the 28 member bloc expanded by 2.5% in 2017. Growth in the final three months of the year was 0.6%, mirroring that of Germany and France.

There are, however, some warning signs for France: it did well in 2017, largely due to the labour reforms of Francois Hollande, but economists warn that the country is continuing to lose export share: it now accounts for less than 13% of the Eurozone’s total exports, compared to more than 17% in 2000.

Like all the world’s leading stock markets, both Germany and France were down in February. Germany fell 6% to close at 12,436 while the French market was down 3% to 5,320.

February began with three of America’s tech giants – Apple, Amazon and Alphabet (the parent company of Google) – in a race to become the world’s first trillion dollar company as they all revealed their latest impressive results. All the runners in the race have their supporters but, as the news from Toys R Us and Maplins showed, their success doesn’t come without a price.

In other company news, US cable TV company Comcast launched a $22bn takeover bid for Sky, rivalling the bid from Rupert Murdoch’s 21st Century Fox.

More generally, figures reported for January showed another good month for the US economy, with 200,000 new jobs created, unemployment holding steady at 4.1% and the average hourly wage for private sector workers up by 2.7% compared to January 2017. As mentioned in the introduction, though, that did add to inflationary worries and the consequent sharp falls in stock markets at the beginning of February.

The Federal Reserve Bank certainly seems to share this optimistic view of the US economy: minutes from its last meeting show that the Fed is preparing for “stronger-than-expected” economic growth this year as corporate America continues to benefit from the President’s decision to slash corporation tax. Legendary investor Warren Buffet said that the move had given his company a $29bn (£20bn) profit boost.

The month ended with good news for supporters of the President. Shortly after seeing his approval rating go above 50% for the first time in eight months, Donald Trump announced that he would be running for re-election in 2020. The news comes 980 days before Election Day – easily eclipsing the 582 days there were before polling when Barack Obama announced his intention to run again in 2012.

There was less good news on Wall Street where the Dow Jones index fell 4% in the month, finishing just above the 25,000 barrier at 25,029.

Far East
We have written several times about Chinese leader Xi Jinping consolidating his grip on power, especially with no obvious successor on view at the recent Communist Party Congress. Now it seems that Xi may well be on his way to a level of power that even Vladimir Putin would envy.

Following the death of Mao Zedong in 1976, the Chinese Communist Party introduced term limits (two consecutive five year terms) to ensure that future leaders could not ‘rule for life’ and enjoy the same cult of personality that had been bestowed upon Chairman Mao. Now all that seems set to change, with the Party last week proposing to remove the term limits, essentially giving Xi the authority to rule indefinitely, having originally been due to step down in 2022. With his ‘thought’ now enshrined in the constitution, Xi is moving towards absolute power in China.

…So crossing him may not be the best idea, which, it appears, the insurance and financial giant Anbang may have done. The ‘grey rhinos’ may sound like a rugby league team having a bad day: it is, in fact, the name given to China’s biggest conglomerates (supposedly because they trample everything in their path) who have been on an overseas buying spree which includes English football clubs.

It has long been rumoured that Beijing wanted to rein in the ‘grey rhinos’ – whether that is to curb excessive borrowing or simply to demonstrate state power is open to debate – and action was duly taken against Anbang as the state took control of the company and brought charges against CEO Wu Xiaohui for ‘economic crimes.’

Wu was supposedly one the best politically-connected bosses in China. Jack Ma, boss of e-commerce giant Alibaba will be hoping to stay on the right side of the authorities as his company saw revenues jump 56% to £9.2bn in the final quarter of 2017, thanks to a record-breaking Singles Day.

Away from China’s version of Game of Thrones, life was much more peaceful across the South China Sea: Japan responded to the problem of its ever-ageing population by raising the state pension age to 70. In company news, banking giant HSBC reported profits for 2017 of $17.2bn – an impressive figure but most analysts were expecting something closer to $20bn. As a result, HSBC’s shares slipped slightly, meaning that they were in step with all the major Far Eastern stock markets in February. All four of the markets on which we report fell, with the markets in China and Hong Kong both down by 6% to 3,259 and 30,845 respectively. The South Korean stock market fell 5% to 2,427 and Japan was down by 4% to finish February at 22,068.

Emerging Markets
HSBC’s profits may have disappointed: India’s second largest state run bank has rather bigger problems to contend with. The Punjabi National Bank has uncovered a $1.8bn (£1.3bn) scam linked to a single Mumbai branch and – apparently – relating to a handful of customers. The fraud amounts to nearly a third of PNB’s market value and is 50 times its profits for the final quarter of 2017. More pertinently, it raises questions about security and confidence for the whole of the Indian banking sector.

The Indian stock market followed the trend by dropping 5% in February to 34,184 but, finally, we come to the two stock markets which didn’t fall. The Russian index was up just 7 points to close the month at 2,297 while the Brazilian stock market rose 1% to 85,354.

And finally
Did anything happen to make the world smile in February? Absolutely – unless you were waiting in the queue at Kentucky Fried Chicken where, sadly, the bargain bucket was replaced by the empty bucket.

Early in February, KFC switched from specialist food distributor Bidvest to DHL for its deliveries but thanks to what were described as ‘operational issues’ (that is ‘we didn’t deliver the chicken’), more than half of KFC’s 900 outlets found themselves without any chicken. DHL’s managing director of retail said, “The reasons for this unforeseen interruption of this complex service are being worked on.” But the Great British Public was knocked sideways by ‘Chickengate’ – so much so that Tower Hamlets police were forced to take to Twitter to ask hungry, distressed diners to stop contacting them.

There were problems of an even more pressing kind for Iceland and its small population of just 340,000 people. The country has impressive green credentials, with virtually all of its energy coming from renewable sources: because of this, many firms have set up data centres there, keen to tick the ‘renewable sources’ box in their annual report. Now, it seems, many of these data centres have turned to mining Bitcoin to generate extra revenue. Unfortunately, mining Bitcoin – via computers solving complex mathematical problems – uses a lot of power. So much so that energy expert Johann Snorri Sigurbergsson is warning that Iceland simply will not have enough energy.

So the Law of Unintended Consequences strikes again: Iceland creates green energy for its citizens: the lure of green energy attracts data centres: the data centres use all the energy: ordinary Icelandic citizens wonder why the lights have gone out.

Let’s see what unintended consequences March brings us…

Retirees embracing social, mobile and tablet

You’ve lived a full and rewarding life, settled down, had a family, and are now reaping the benefits of working hard and investing in your future. But has the world got smaller since back when you first began to make your mark? Now, through using social media on your tablet or smartphone, you can find that schoolfriend that emigrated halfway across the world or have a video chat with your grandchildren even though they live some distance away, or perhaps you use your smartphone or tablet to manage your portfolio while you are on the go.

Well, you are not alone. A recent report by Ofcom has found that there has been a significant growth in older people using technology, with four in ten people aged 65-74 using a smartphone and the use of tablets in the over-75s having nearly doubled.

So, that old school friend? Perhaps you managed to track them down via Facebook, as the report also shows nearly half of 65 to 74 year olds have a social media profile. But that’s not to say being plugged into cyberspace is all plain sailing.

Alison Preston, Head of Media Literacy at Ofcom, said: ‘The UK’s older generation is beginning to embrace smart technology and using it to keep in touch with family and friends. But some older people lack confidence online or struggle to navigate search results. Many are new to the internet so we’d encourage people to help older friends or family who need support getting connected.’

But this really, in the grand scheme of things, is a relatively minor issue when you consider how hard you have worked to be able to step back and enjoy time with close friends and family. Perhaps you have helped the next generation get a foothold on the property ladder or supported their education and career aspirations, so a bit of help navigating the digital world really isn’t much to ask! This is especially true given that Ofcom’s report also shows older users spend half as much time online than their younger counterparts, with over 65s averaging about 15 hours a week compared to 32 hours among 16-24 year olds. Maybe the key point is we all stay connected in an ever changing world, not just online but offline as well.